Your Questions About Investing For Dummies

What is mutual fund, how to invest in MF and what is the best MF to invest at this current market position?

I am a new investor, I want to invest in mutual fund. But I have not any idea regarding MF that means what is MF, is it a safe investment or nor, how to invest in MF etc. So kindly guide me regarding this.

Justin answers:

A mutual fund in an investment vehicle that pools together money from many investors and allows you to invest in dozens, hundreds, or thousands of companies all at once and so there is less risk. This protects you if any one company or industry runs into trouble. The contents of the fund is chosen by a fund manager(s) or for an index fund tries to mimic the contents of a whole market or section.
You need to think about your risk tolerances in choosing what fund is best for you, not to mention where you are investing through. Both are extremely important. If you want something safer there is something like the Total Stock Market index or S&P 500, but if you want to take on some more risk or some potentially better returns there is a wide range to choose from, such as small or mid-caps, sector specific funds like Energy or Health Care, or international funds like Europe, Pacific, or Emerging Markets. It would be wise to have a diversified portfolio.
As to how safe they are, they are far safer than throwing your money into individual companies and hoping for the best. If you chose a winner you could get a lot more, but if you didn’t you could lose a large amount of your investment. Your time horizon is very important as well. The more time you have the more risk you can take on since you have a chance to recover if the market declines. Ultimately it is your decision though.
Where you put your money is also very important. Some of the best are Vanguard, T. Rowe Price, Fidelity, and Schwab. Avoid the big banks like the plague. Don’t let them rip you off with loads (sales charges) and fees. Check how much the company charges you as an expense ratio. A good one might charge you 0.2-0.8 %. If they charge more than 1% than go somewhere else. And if they charge any kind of 12b-1 fee, hold on to your wallet and RUN. If you want to check, go to a site like
Morningstar or http://finance.yahoo.com and check each fund. Vanguard has some of the lowest expense ratios anywhere.
Many places will hit you with high front end sales loads, ripoff 12b-1 fees and stiff expense ratios. That could rob you of potentially tens or even hundreds of thousands of dollars over your working career. If you want to see a demonstration of this, look at https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost and compare.
Read some basic books to teach you the fundamentals. Three excellent reads are Mutual Funds for Dummies, The Complete Idiot’s Guide to Investing, and Investing for Dummies. You can probably find them in your local library. Before doing anything, make sure you have enough in savings in case things go south for at least 6 months.

Donald asks…

A good way for a teenager to start investing?

I’ve recently been looking into investing some money, the problem is, I have little knowledge of it. I know about basic investments like bank accounts, Cd’s, and other stuff like that, but not much more.

I currently have about $2,600, but only want to invest up to about $1000 of it. I dont want any investments that are TOO risky, but would like to make some money- either long term or short term.

What are some suggestions to start?

Justin answers:

These other guys seem to just want to sell you something. They didn’t see that your just a teenager and there are some laws….you even have to have your parents sign for you to have a money market acct. Money Mkt acct is a safe place to start. Do your parents invest in stocks with a broker or on line? Some on line investment companies have money mkt acct that pay 4 to 6% return. Read Investing for Dummies and learn about the stock market.

William asks…

How do you start initially investing into the stock market or for bonds?

I’m 25 and have wanted to begin little by little in the stock market. The thing is I don’t know where to start either by finding a stock broker or company where I can invest into. I worked for five years at a corporation here in PA and we had a TIAA CREF 401K plan but I am no longer with them and want to know how to do this to make money on my own with the stock market. Thanks.

Justin answers:

Go spend the best $20 you have ever spent.
Go to a bookstore and look for books such as
Investing for Dummies, The Idiot’s Guide to Investing, or Investing Made Easy.
These books will have a chapter on different discount brokers and break down fees.
They will also explain, stocks, cd’s, mutual funds, bonds, treasuries, etf’s, etc.
You will keep this book, and refer to it for years to come.

Mark asks…

How should I invest my money as an undeducated 25 year old?

So before you give me an answer I’ll give you a little bit of background. I’m a 25 year old who has been investing through a broker for the past 4 years. I want to take more control and hopefully get better returns.

My annual salary is $90,000. I have approximately $12,000 in my previous employer’s 401k program and $27,000 in a fidelity money market account and distributed among various mutual funds. Recently I just relocated and sold my home leaving me with about $20,000 to invest. I have quite managable debt, a student loan, a car payment and some old hospitable bills all with low interest.

I have started doing some research but it seems quite complicated. If someone could provide some guidance or even a good place to start I would be grateful. Thanks in advance!
Just some more details. When I relocated I did not buy a house. I’m in the Phoenix area where housing prices are continuing to decline. I don’t feel that real estate would be a good investment at this point in time as all indicators point to decreasing values.

Justin answers:

With that much of an annual salary i would try to save a little more for retirement in an aggressive mutual fund or something. Cause you make more than most people and even more than most famalies so i would try to retire early man.

If you like to gamble open a scottrade account, read investing for dummies or take a college class in stock trading and invest a little at a time until you learn all the ropes and then youll have complete control.

James asks…

How to go about investing for future?

I’m a 23 year college student trying to figure out what the 401k plan is and how to invest money in the stock market. I really am clueless on it all. I am very interested in saving and investing money, and increasing money overtime.(who isn’t). Thanks for advice.

Justin answers:

There is a great book for clueless people of any age: “Investing For Dummies.” I highly recommend it. In this day and age, everyone needs basic “investing literacy.” It could be the best $15 you ever spend.